Usufruct and Bare Ownership: How to Prove Property Ownership to the Tax Authorities

Imagine: you inherit the bare ownership of a house in Vire, while your uncle holds the usufruct. Upon his death, the tax authorities demand inheritance tax on the total value of the property, considering that it belonged to the usufructuary. Unfair? Perhaps not if you can prove otherwise. This is exactly what the Court of Cassation ruled in 1984.

The question every owner or heir asks: how to prevent the tax authorities from presuming that the assets form part of the usufructuary's estate? Article 751 of the French General Tax Code establishes a presumption: any immovable property of which the usufructuary had enjoyment is deemed to belong to him, unless evidence to the contrary is provided. But such evidence can be adduced.

This decision, handed down nearly forty years ago, remains relevant today. It provides a key for bare owners: demonstrating that the acquisition of the usufruct and the bare ownership was carried out in a single deed, for a global price, may be sufficient to rebut the presumption. Let us delve into this case to understand how to protect yourself.

The facts: a story that happens every day

Mr A, a property owner in Mondeville, and his friend Mr B decide to acquire a building together: Mr A buys the usufruct, Mr B the bare ownership. The same notarial deed mentions a global price for both rights. A few years later, Mr A dies. The tax authorities include the building in his estate, considering that, in accordance with Article 751 of the CGI, the property belonged to the usufructuary. Mr A's heirs contest: they argue that the property did not belong to their father, but that he only had the usufruct, the bare ownership being held by Mr B.

The dispute goes to court. The lower courts (first instance and Court of Appeal) rule in favour of the heirs. They consider that the bare owner, Mr B, has provided evidence to the contrary by showing that the acquisition of the usufruct and bare ownership resulted from a single deed and a global price. The tax authorities appeal to the Court of Cassation.

The Court of Cassation dismisses the appeal. It confirms that it was within the exercise of their sovereign power of assessment that the lower courts found that evidence to the contrary had been provided. In other words, the judges sovereignly assessed the facts to conclude that the property did not form part of the usufructuary's estate. A victory for the bare owner.

The reasoning of the court — dissected

Article 751 of the French General Tax Code (CGI) provides: "Unless evidence to the contrary is provided, all immovable property which belonged to the deceased as usufructuary and of which he had enjoyment shall be deemed to form part of the usufructuary's estate." This presumption can be rebutted by the bare owner or the heirs, provided that objective elements are brought forward.

In this case, the tax authorities argued that the global price did not allow the value of the usufruct to be distinguished from that of the bare ownership. However, the lower courts held that the single notarial deed and the global price precisely constituted proof that the acquisition was joint and that the property could not be attributed entirely to the usufructuary. The Court of Cassation validates this reasoning: it recalls that the lower courts sovereignly assess the evidence.

What is striking is that the Court does not create a new rule; it applies existing law by confirming that evidence to the contrary can be provided by any means. Here, the bundle of indicia (single deed, global price, status of the parties) sufficed. For practitioners, this decision is a confirmation: in tax matters, evidence to the contrary is not impossible, but it must be solid.

One point to note: the decision does not specify whether the global price was apportioned or not. The essential point is that the acquisition is concurrent and formalised in a single deed. This encourages great rigour when drafting deeds.

What this means for you — practically

For bare owners: if you acquired the bare ownership of a property at the same time as another person acquired the usufruct, keep the notarial deed safe. If the usufructuary dies, you can use it against the tax authorities to prevent the property from being included in his estate. Imagine you acquired the bare ownership of a flat in Mondeville for €100,000, while the usufructuary paid €50,000. Without proof, the tax authorities could claim tax on €150,000. With the deed, you demonstrate that you own the bare ownership and only the usufruct is in the estate.

For usufructuaries: be aware that the assets of which you have the usufruct will be presumed to form part of your estate. If you want your heirs not to pay excessive tax, it is prudent to keep evidence of the origin of your rights (acquisition deed, gift, etc.).

For purchasers: when buying a split-property asset, require the deed to clearly state the apportionment of the price between usufruct and bare ownership. If the price is global, have it recorded. This will facilitate proof in the event of a dispute.

For notaries: this decision highlights the importance of drafting deeds. A well-drafted deed can avoid years of litigation.

Four tips to avoid this type of dispute

• Keep all notarial deeds: keep a copy of the acquisition deed, even an old one. It is your best weapon against the tax presumption.
• Have a separate deed or an addendum drawn up: if the initial deed does not distinguish the values, ask your notary to draft a certificate or addendum specifying the apportionment.
• Anticipate the usufructuary's death: if you are a bare owner, prepare a file with the acquisition deed, payment receipts, and any document showing that you financed the bare ownership.
• Consult a specialist lawyer: if in doubt about the situation of your assets, a quick consultation can save you from a tax adjustment. Maître Zakine practises throughout France, including in the jurisdiction of Caen.

Further reading: related case law and developments

This 1984 decision is part of a consistent line of the Court of Cassation. A judgment of 15 March 1989 (No. 87-14.721) specifies that evidence to the contrary may result from any element, in particular the acquisition deed, tax returns or accounts. On the other hand, if the usufructuary alone financed the acquisition, the presumption is difficult to rebut.

Since then, case law has evolved on the concept of "evidence to the contrary": judges require precise and consistent elements. For example, a simple bank statement showing a transfer is not sufficient if it is not corroborated by the deed. The trend is towards stricter evidentiary requirements, but the 1984 solution remains a reference for joint acquisitions.

For the future, it is possible that the legislature will clarify Article 751, but for now, proof by any means prevails. Practitioners must therefore be vigilant when drafting deeds.

Summary and next steps

FAQ - Frequently asked questions

Can the tax authorities challenge the evidence provided? Yes, they can challenge it, but if you have a single notarial deed with a global price, the judges may consider that the evidence has been provided, as in this case.

What if I do not have a deed? Gather any document establishing the acquisition: correspondence, bank statements, certificates. But the notarial deed remains the strongest evidence.

What are the time limits for challenging a tax assessment? You have 30 days to object after notification of the notice of assessment. After that period, you can take the case to court within two years.

Does this decision apply to recent inheritances? Yes, the 1984 case law is still applicable. It has been confirmed by subsequent judgments.

Can I include a clause in the deed to avoid this dispute? Yes, your notary can insert a clause stating that the global price is apportioned between usufruct and bare ownership, or that the acquisition is joint. This will facilitate proof.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of litigation — and often much more. Book an appointment →